There’s an old adage in college planning: You can always go to a cheaper school or skip college altogether. But if those two scenarios are not on your radar, then you need to explore three basic money resources: Savings, Cash Flow and Borrowing.
Yesterday’s Money: Savings
Excluding emergency accounts, most parents have some short-term monies, retirement accounts and home equity they can access. It may not be the best use of the money, especially borrowing from a 401(k), but if there’s no appetite for student loans and other forms of grant money, then that’s where the money is. Keep in mind that some households have assets that they can sell to generate money, so a thorough inventory of personal property could yield some undiscovered assets.
Today’s Money: Cash Flow
It’s stunning to realize that most Americans operate their finances without a budget.
They don’t even have a handle on their monthly cash flow. But if you create a budget, you’ll be able to review your cash flow, i.e. money left over after essential and discretionary spending. Discretionary spending may be curtailed while the children are in school to free up cash flow for college payments. Downsizing your lifestyle to create greater cash flow could be a significant part of raising money for college.
Tomorrow’s Money: Borrowing from the Future
When yesterday and today’s money are not enough, borrowing against the future as a last resort may be the only resort; but before spending dollars you haven’t yet earned, let your child work during the summer, holidays and between semesters. This not only can help in paying college expenses, but it can also inculcate a deep appreciation for work. In fact many college age students that work manual labor jobs are motivated to do well in school in order to avoid blue-collar employment. It’s your life. It’s your time. It’s your money.
John McDonough has contributed to this press release. Segments in part or whole are from his publications.